1. Arizona-Individual School Tuition Organization Tax Credit

Program type: Tax credits for individuals for contributions to scholarship organizations

Description: Individual taxpayers may receive Arizona income tax credits for charitable contributions to school tuition organizations (STOs). The amount of credit is equal to the amount contributed. The maximum credit allowed to single taxpayers or heads of household is $500. The maximum credit allowed to married couples for the 2006 taxable year and subsequent taxable years is $1,000. There is no maximum aggregate amount of tax credits allowed in any year.

STOs provide scholarships for attendance at qualified private schools. Schools enrolling scholarship students may not discriminate on the basis of race, color, handicap, familial status, or national origin. Student eligibility for scholarships is determined by STOs individually. Most STOs base eligibility on financial need, while others benefit students in specific areas or private school system.

Amount of assistance: The scholarship amount is established by STOs individually.

Number of participants: During the 2006-07 school year, 24,678 students received scholarships from 56 STOs to attend 357 participating private schools.

Authorizing statute: A.R.S. § 43-1089

Legislative history: The Arizona tax credit program was enacted in 1997 and first implemented in the 1998 taxable year. It was the first program of its kind in the U.S. On May 20, 2005, Arizona increased the maximum tax credit available to married couples.

Judicial history: In January 1999, the Arizona Supreme Court upheld the constitutionality of the tax credit program in Kotterman v. Killian. In October 1999, the U.S. Supreme Court declined to review the case, thereby allowing the state ruling to stand. In February 2000, the Arizona Civil Liberties Union filed a second, separate challenge to the program in federal district court in Winn v. Hibbs. The district court dismissed the suit under the Tax Injunction Act, which forbids federal court tax suits if state court suits are possible. This dismissal was later overturned by the U.S. Court of Appeals for the Ninth Circuit, whose ruling was affirmed by the U.S. Supreme Court in June 2004, returning the case to federal district court for trial. The case was subsequently dismissed in federal district court on March 24, 2005.

For more information, see: http://www.azdor.gov/ResearchStats/Schooltaxcredit.htm.

2. Arizona-Corporate School Tuition Organization Tax Credit

Program type: Tax credits for corporations for contributions to scholarship organization

Description: Corporations may receive a tax credit for contributing to a scholarship organization. The amount of credit is equal to the amount contributed. Under the state statute, the maximum aggregate amount of tax credits is $10 million in 2007 and increases annually by 20 percent. Tax credits are awarded to corporations on a first-come, first-serve basis.

STOs provide scholarships for attendance at qualified private schools in the state. To be eligible for one of these scholarships, the student's family income cannot exceed 185 percent of the income limit required for students to qualify for federal free or reduced-price lunch program. Additionally, the student must have attended a public school during the prior year or be entering kindergarten. In order to be a state qualified school, schools may not discriminate on the basis of race, color, handicap, familial status or national origin.

Amount of assistance: The maximum scholarship for K-8 students is $4,200, and $5,500 for students in grades 9-12. These limits are set to increase by $100 each year.

Number of participants: The program begins in the 2007 taxable year.

Authorizing statute: A.R.S. § 43 -1183

Legislative history: On March 29, 2006, this program was signed into law, thereby creating a new tax credit program to corporations for contributions to scholarship organizations. The law originally established the annual aggregate amount of credits at $5 million; the amount was increased to $10 million by another bill enacted later that legislative session.

Judicial history: On March 7, 2007, a Maricopa County Superior Court judge threw out the case against Arizona's Corporate School Tuition Organization Tax Credit. In Green v. Garriott, the judge held that the tax credit did not violate the Arizona constitution upholding the Kotterman decision made on the individual tax credit.

3. Arizona-Arizona Scholarships for Pupils with Disabilities Program

Program type: Vouchers for students with disabilities

Description: This scholarship program provides special needs children with the option of attending another public school or receiving a scholarship for attendance at a qualified private school. Established in 2006, the program allocates $2.5 million for special needs students to use for tuition and fees or the actual cost per pupil, whichever is greater. To be eligible, a student must have an Individualized Education Program (IEP) and must have attended a public school during the prior year. In order to be a state-qualified school, schools may not discriminate on the basis of race, color, handicap, familial status or national origin.

Amount of assistance: The amount of assistance is the school's tuition and fees or actual cost per pupil, whichever is greater, but may not exceed the amount of funding the student would have generated had he or she remained in a public school. For the 2006-07 school year, the average scholarship amount of assistance was $7,735 with scholarships ranging from $3000 to $23,000.

Number of participants: For the 2006-07 school year 34 students received scholarships to participate in this program.

Authorizing statute: A.R.S. § 15-891- A.R.S. § 15-891.06

Legislative history: On June 21, 2006, the Scholarship for Pupils with Disabilities Program was signed into law, creating a new statewide voucher program to students with disabilities. The first year of implementation is the 2006-07 school year.

Judicial history: On June 13, 2007, the Maricopa County Superior Court judge ruled that the scholarships for student with disabilities were constitutional and did not violate the state's Blaine Amendment.

For more information, see: http://www.ade.az.gov/hb2676/.

4. Arizona-Displaced Pupils Choice Grant Program¹

Program type: Vouchers for foster care children

Description: These scholarships will be available to any student who has been in the foster care system at any time before high school graduation. Students who have since been adopted will still qualify for the voucher. Vouchers will be on a first come first served basis and can be used to pay tuition at any private school in the state of Arizona that chooses to participate. Participating schools may not discriminate on the basis of race, color, handicap, familial status or national origin.

Amount of assistance: Currently, vouchers are capped at $5,000 or the selected schools tuition whichever is less; the state has allocated $2.5 million for this program.

Number of participants: The first year of this program will be the 2007-08 school year.

Authorizing statute: A.R.S. § 15-817- A.R.S. § 15-817.07

Legislative history: In 2006, the Displaced Pupils Choice Grant Program was signed into law.

Judicial history: On June 13, 2007, the Maricopa County Superior Court judge ruled that the scholarships for displaced pupils were constitutional and did not violate the state's Blaine Amendment.

For more information, see: http://www.ade.az.gov/displacedpupilgrants/.

1 This program has not been implemented yet.